But prices have proven more resilient than expected
The average UK house price fell by 1.9% to £279,569 in August, recording the largest monthly fall since November 2022 last year due to higher mortgage costs, Halifax has reported.
The mortgage lender said property prices also dropped by 4.6% or around £14,000 on an annual basis, the biggest year-on-year decrease since 2009. It noted, however, that this was relative to the record high house prices seen last summer.
The prices are now back to the level seen in early 2022 and remain around £40,000 above pre-pandemic levels.
“It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand,” Kim Kinnaird, director of Halifax Mortgages, commented on the results of the latest Halifax House Price Index.
“However, there is always a lag effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices. Increased volatility month-to-month is also to be expected when activity levels are lower, though overall, the pace of decline remains in line with our outlook for the year as a whole.”
“Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July. While these did ease last month, rates remain much higher compared to recent years.”
Ranald Mitchell, director of independent mortgage broker Charwin Private Clients, agreed that the effects of the increases in borrowing costs are now very apparent, with property sales harder to achieve and sellers being tempted by lower offers so they can move on.
“Mortgage rates are continuing to slowly decrease week by week, so a lot of attention will be paid to how lenders react and price when the Monetary Policy Committee inevitably increases the base rate again at this month’s meeting,” Mitchell said.
James Briggs, head of personal finance intermediary sales at Together, pointed out that with further Bank of England rate rises forecasted, hopeful borrowers are tracking mortgage pricing closely with careful consideration of when to strike for the best deal.
“With the continued squeeze on household budgets, an estimated 35% of people’s take-home pay is now being diverted to cover mortgage repayments,” he said. “This may trigger further issues later this year and lead to more subdued activity.
“Indeed, market forecasts suggests that the rate of mortgage approvals will fall for Q3, dropping to around 40,000 by September, from 55,000 in June. With the overall 30% year on year drop in mortgage approvals looking likely, potential buyers should consider specialist lenders, who have the ability to assess finances on a case-by-case basis.”
Kinnaird believes that the market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years.
“We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts,” she said. “While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain some £40,000 or 17% above pre-pandemic levels.”
Any thoughts on the findings of the latest Halifax House Price Index? Let us know by leaving a comment in the discussion box at the bottom of the page.
